Investing would be easy if you had a clear view of where the world would be in the future. Imagine a crystal ball showing you the industries that would flourish and those that would flounder. Whilst perfect foresight is impossible, there are some time-tested patterns that can serve as a beacon for investors.
One such example is the power of incentives. As Charlie Munger famously quipped, “show me the incentive, I’ll show you the outcome.” For James Tsinidis, Portfolio Manager of the Munro Climate Change Leaders Fund, following the incentive underlines the thesis behind their high-conviction views on the opportunity in decarbonisation.
Tsinidis explains that there are three primary incentives pulling capital into industries tackling climate related issues. One of those is government programs such as the Inflation Reduction Act in the US, where US$500 billion of spending and tax breaks will be directed at clean energy and healthcare. That’s a huge amount of capital that will take decades to be deployed.